LDN Business - Japan Economy

Japan's economy manages 1.1% growth rate despite headwinds

[August 17, 2026] By YURI KAGEYAMA

TOKYO (AP) — Japan’s economy grew an annual rate of 1.1% in the April-June quarter even as private consumption stayed flat and the growth of exports declined, according to government data released Monday.

Japan ’s real GDP, or gross domestic product, the sum value of nation’s goods and services, grew at a seasonally adjusted rate of 0.3% from the first quarter to second quarter of this 2026, according to Cabinet Office data.

The annualized rate shows what the growth rate would have been if it had continued for a whole year. It was 2.1% in the January-March period.

Private spending dipped 1.2% in April-June compared to January-March, while exports grew 0.5%.

Exports for the latest period were driven by the global demand for Japanese autos and semiconductors. Japan is home for Toyota Motor Corp., Honda Motor Co. and other top automakers.

Global demand for computer chips being powered by interest in AI, helping to support Japan's exports.

Government consumption rose 1.6%.

Quarterly GDP growth was lower than what analysts had expected. The Japanese economy has been hurt by the war in Iran, which has sent energy costs surging. That’s especially difficult for resource-poor Japan, which imports almost all its oil.

The Strait of Hormuz, a vital transport route for oil exports from the Persian Gulf to Asia, has been effectively blocked due to the war, pushing prices higher. Japan has released some oil reserves and is working on alternate routes.

Brent crude has been recently trading at about $88 a barrel, up from about $65 a year ago, although that’s lower than earlier this year, when it shot above $110 a barrel.

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Vehicles are parked for export at a Yokohama port, near Tokyo on Aug. 1, 2025. (Takuto Kaneko/Kyodo News via AP, File)

A weak yen has also worked as a plus for some Japanese companies, including giant exporters like Toyota, boosting the value of overseas earnings when translated into yen.

But a weak yen makes it more expensive to import raw materials, raising prices for consumers and denting spending.

Concerns have been growing about rising prices, as wage growth in Japan has been relatively stagnant.

Prime Minister Sanae Takaichi has promised to get growth going again, but her public support ratings, while still high compared to some of her predecessors, have been gradually sinking.

The U.S. dollar has been trading at near 160 Japanese yen levels lately, up from about 145 yen a year ago. It was trading at about 159 yen after Monday’s economic data got released.

The Bank of Japan recently raised its economic growth outlook to 0.6% for the fiscal year through March next year, from an earlier 0.5%

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